Events tend to throw the world into chaos. With the world in chaos, the stock markets inevitably see mayhem. The mayhem in Europe in recent weeks is only evidence of one thing. The more things change in the world, the more our behavior towards investments remains the same. I remember every single crisis in the financial world since I started investing in 1990. The stock market behavior has been identical through every crisis. Panic will be the first reaction. The bad news will slowly sink in and gain acceptance. Then for a prolonged period of time, investors wait for a similar event to recur. Nothing of that sort would happen when investors expect it to recur. The investors gradually get convinced that their fears are unfounded and the fears gradually recede. Once the fears recede, more investors step out and take risks again. Over a period of time, the tribe of risk takers keep growing until it becomes a mob of possessed people unwilling to listen to saner voices. This mob is finally controlled by the next phase of chaos which is created by their behavior itself. This cycle virtuously plays out in the stock market almost every decade. Yet, investors hardly seem to learn and only create a bigger problem by showing greater irrationality.

Is the stock market only a place where one loses his money? Certainly not. The capital market is a principally a wealth creator. It is the investors who destroy the wealth created in the capital market by over doing things and behaving irrationally. Rational behavior is easier said than practiced. The stock markets are better known for irrationality than for logical reasoning. But, that has to do with the people who come to the stock market seeking irrational returns and has little to do with the mechanism of the stock market itself . The stock market mechanism is a great way of creating wealth and discovering the fair value of businesses. It is a free market where buyers and sellers decide the value of a company by trading freely and discovering the price of a stock. The way in which the prices grow closer to the fair value is called price discovery. This process of price discovery is meant to evolve into an efficient one over a period of time. The same process of price discovery can go wrong when investors tend to flock towards a single stock or sector without judging the fair price of the business. But, that is not so important as the positive things that the price discovery process does to stabilize the valuation of a company and to discover it fairly.

Investors must focus on the price discovery aspect squarely and ignore the market perception of a stock. When there is chaos, the weakest valuation of a business prevails. At this point , all the negatives of the business are factored into the price. The price discovery process actually favors the buyer and irrationality is favorable to buyers. By locking in at those prices, investors can take advantage of the irrationality in the price discovery process. Investors must principally focus on this process of price discovery and take advantage of this process to make his investing work .The IPO is another instance of price discovery. Usually, IPO’s start at a price fixed by the merchant bankers. This is not necessarily a fair value. But, the trading after listing allows investors to gradually discover the fair price of the stock. As results are declared and the fundamental of the company understood fully by the investing public, the price discovery of the stock will become more and more mature. The fair value of the company is obtained by discovering the price of the stock over a prolonged period of trading.

The beauty of the price discovery process in the stock market is its transparency. Most factors are clearly known. The prospectuses of companies are freely available. Their annual reports are all online. The supply of stock is clearly known. The demand is open for all to see. The trading volumes and their delivery percentages give a clear idea of the speculative factors built in the price. All announcements are available to investors and there is no information gap. Any speculative surge is swiftly controlled by the exchange’s volatility management system. Bubbles in stock prices can easily be traced even as they form. The increasing systemic controls in the stock market have ensured that the scope for bubbles are minimized due to the trading platforms and the way stock exchanges function. Transparency is a key tool in this process.

The price discovery process is what has made stock investing much safer in the past decades. Investors must learn how to sue this process for their benefit and to steer clear of investments which are trading at irrational prices due to speculative trading. The process clearly tells us when something is wrong. It is up to us to avoid the traps and keep our investing out of the danger areas.

Samyuktha holds an undergraduate degree in Mathematics from Stella Maris College, Chennai. She has also completed Investment Advisory qualifications conducted by NISM (National Institute of Securities Markets). She began her career as an analyst with Goldman Sachs. She is an autodidact, and has spent the last few years acquiring knowledge on financial markets and financial planning.

Gayathri

Gayathri Muraly, a qualified Chartered Accountant, is part of ithought’s financial planning team. An All India rank holder in the CA final examination, she has worked with S.R. Batliboi & Associates (Member Firm of Ernst & Young Global), in their audit and assurance services segment. She has been a prolific achiever throughout her academic pursuits and career. She has a wealth of experience in Accounting, Audit and Finance across diverse industries. Her functional skills include understanding businesses and their financial statements. She has also worked on tax and risk management solutions for clients.

Prashanth

Prashanth studied business administration and data analytics in college. Having joined ithought’s financial planning team in 2015, he has three years of industry experience. He enjoys working with numbers and is passionate about simplifying client experience. Prashanth is also an ardent football fan and an aspiring marathon runner.

Gaurav

Gaurav Jain is a qualified chartered accountant and has more than five years of work experience in the accounting and finance industry. He completed his graduation from Loyola College, Chennai. After having worked with companies like KPMG, Goldman Sachs and Barclays, Gaurav decided to work with a full-fledged financial advisory firm and joined ithought in 2015. He heads ithought’s financial planning desk, longitude.

Vikash

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Rashmika

Rashmika graduated from Ethiraj College for Women with a Bachelor’s degree in Commerce. She is a conscientious and meticulous professional. Prior to working with ithought, Rashmika worked at Goldman Sachs.

Maruthi

Maruthi has an engineering degree in Electrical & Electronics from VIT University. His first position was with TCS Ltd where he worked as a developer for a leading UK Bank’s Investment Banking Division. He followed it up with PGDM from IIM Ahmedabad and worked in sales & business development roles for two years in Healthcare and Real Estate firms, before joining ithought in 2015. He is a dedicated relationship manager focused on improving client experience.

Anirudh

Anirudh is a relationship manager at ithought, specializing in business development and client management. He has been with ithought since 2012 and enjoys being a part of the growing business. He has a Master’s degree in Accounting & Finance from the London School of Economics. He never misses a game of basketball on the weekends.

Amit

Amit Parakh is an engineer by design and a personal financial services advisor by passion. He has a wealth of experience in the financial services industry. Amit has spent more than two decades working with banks, asset management companies (AMCs), and financial advisory firms. After having worked with HSBC, HDFC SLIC, and ICICI Prudential Mutual Fund on Sales Strategy, Product Communication, and Distribution, Amit was keen to transition to the client facing side and help clients through their financial journeys. His value systems in client service are closely aligned with ithought’s and he joined us in 2015.

Ajay Kumar

Ajay is a commerce graduate from Loyola College, Chennai and has been working as a relationship manager with ithought since 2010. During his time here, he has developed a keen interest in value investing and financial planning. He is known for his warmth and is committed to client service. Ajay is also a professional cricketer and is passionate about traveling.

Prasath

Prasath Raj has been with ithought from inception and has over twelve years of experience in financial markets. He is a Commerce Graduate with an MBA in Finance. He is also a derivatives specialist and has extensive knowledge on equity shares and mutual funds. Prasath is a voracious reader and leverages his extensive knowledgebase to provide unique insights. He utilizes these competencies to formulate sound investment strategies for our clients.

Niranjan

Niranjan is an applied Mathematics Graduate from the College of Engineering, Guindy. In addition, he has cleared the FRM (Financial Risk Manager) certification exam from GARP (Global Association Of Risk Professionals). Niranjan has an avid interest for financial markets and has been following equity markets since his school days. He has been an active investor for over sixteen years. Niranjan has been involved with strategy at ithought for over seven years now.